May 19, 2004
Fed: Inflation, Interest
Rate Increases Coming, But Slowly
U.S. inflation and interest-rate rises are coming --
although productivity growth and slow economic growth mean they can be
gradual, Fed officials said yesterday, Reuters reported. 'I am not
dismissing the risk of an unwelcome further increase in inflation,' said
Richmond Federal Reserve Bank President Alfred Broaddus. 'However, I
think the risk is manageable.'
'Consequently, the Federal Open Market Committee's
expectation ... that it will likely be able to transition to a less
accommodative policy at a 'measured' pace, strikes me as reasonable,' he
told the Maryland Bankers Association. Strong U.S. job growth and a
pickup in price measures have convinced financial markets that Greenspan
and his fellow policy-makers will raise interest rates this summer,
possibly as soon as their next meeting at the end of June, the newswire
reported.
Air Canada Auto
Workers Union Rejects Cutbacks
Air Canada failed for a second time on Tuesday to meet
a deadline to obtain wage concessions from a last holdout union, putting
at risk an C$850 million ($612 million) rescue package that Deutsche
Bank AG has offered the insolvent airline, Reuters reported. The
Canadian Auto Workers (CAW) union, which represents Air Canada's 5,900
customer service employees, rejected a final cutback proposal from
company negotiators late on Tuesday. Union officials said they hoped to
break the impasse by resuming bargaining later in the evening in
Toronto, but Air Canada refused to commit itself. 'We have received the
CAW response and we are reviewing it,' Air Canada spokeswoman Isabelle
Arthur said. The impasse comes as Air Canada court protection from its
creditors is scheduled to expire on Friday, the newswire
reported.
International Steel Completes Weirton
Acquisition
International Steel Group Inc.
on Tuesday said it had completed the acquisition of the assets of
Weirton Steel Corp. through a subsidiary, Reuters reported. The purchase
price, including the assumption of some liabilities, was $253 million
but remains subject to adjustment, the company said in a
statement. Weirton Steel,
which had been the largest tin mill product producer in the United
States, filed for bankruptcy almost exactly a year earlier.
Errors Cited at Adelphia
Trial
A former vice president of the Adelphia Communications
Corporation, James R. Brown, testified yesterday that the
indictment of the company's founder, John J. Rigas, and two of his sons
contained errors about fraud charges against the men, Bloomberg News
reported. The 102-page indictment contends that Adelphia falsely claimed
5,300,517 basic cable subscribers on May 15, 2000. After reviewing
documents, Brown said the actual number was 5,003,517, a number
misstated in both the original indictment in September 2002, and an
amended one filed nine months later, the newswire reported.
Owens Corning Creditors
May Renew Bid For Chapter 11 Trustee
One day after a federal
appellate court lifted a stay freezing action in the chapter 11
bankruptcy of Owens Corning, the official body representing creditors
said it would amend its bid to have a trustee appointed in the case. The
motion for a chapter 11 trustee, originally filed in October 2003, has
been in limbo for months, as some creditors attempted to oust U.S.
District Judge Alfred Wolin from the Owens Corning case. On Monday, a
federal appellate court disqualified Wolin from presiding over the
bankruptcy and two other large chapter 11 cases filed in Wilmington to
resolve billions in liabilities for asbestos personal injuries.
While the recusal issue wound through the courts, critical matters in
the Owens Corning case stalled for lack of a district court judge to
oversee them. Monday's ruling by the Third Circuit Court of Appeals in
Philadelphia removing Wolin from the Owens Corning case also lifted a
stay that had been holding up the motion for appointment of a chapter 11
trustee.
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Housing Starts Dip In April, Retail Sales
Mixed
U.S. housing starts dropped in April but permits to
build new homes beat expectations as builders anticipated steady demand
fueled by low mortgage interest rates, a government report showed
yesterday, Reuters reported. The Commerce Department said homebuilders
broke ground at a seasonally adjusted annual rate of 1.969 million units
last month, down 2.1 percent from an upwardly revised 2.011 million in
March. Analysts had expected starts to edge down to a 1.99 million unit
pace.
Separately, chain-store sales fell 0.8 percent last
week, after a 0.3 percent rise the previous week, the International
Council of Shopping Centers and UBS said in a report. Sales were up 6.2
percent over the prior-year period. 'Though we saw a slight decrease in
sales this past week, consumers did continue to shop for summer-related
merchandise, especially fans, air conditioners and summer apparel,'
Michael Niemira, ICSC's chief economist and director of research, said
in a statement.
A separate report from Redbook Research showed sales
at U.S. chain stores stayed high in the latest week, helped by
comparisons to a weak prior-year period and strong demand for
warm-weather items. Redbook said sales last week at major U.S. retailers
rose by 4.8 percent on a year-over-year basis. Sales so far in May were
up 0.7 percent compared with April. Department stores reported increased
customer traffic and customers buying more items at full price, the
report said.
MCI Initiates Review of Cash Needs
MCI Inc., which emerged from
bankruptcy last month, said today its board of directors has begun a
review of the company's cash needs as part of the telecommunications
company's reorganization plan, Reuters reported. MCI said it has yet to
determine the company's excess cash or its application. The
reorganization plan obliges MCI to work out how much cash it had on its
emergence from bankruptcy on April 20, the company said.
Global Crossing Has $100 Million Financing Deal
Global Crossing Ltd., which revealed an accounting
problem last month that threatened much-needed financing, said today it
had secured a $100 million bridge loan from an affiliate of its majority
owner Singapore Technologies Telemedia, Reuters reported. The
telecommunications company, which emerged from bankruptcy about five
months ago, said that under the credit facility, which matures in
December, it can borrow in phases over the next several months. The
agreement has a number of significant conditions related to financial
targets, the newswire reported.